Central banks signal a slower path for rate cuts as inflation proves sticky

Policymakers on both sides of the Atlantic pushed back this week against market expectations of rapid rate cuts, pointing to services inflation that has refused to cool as quickly as goods prices.

Officials stressed that decisions will remain data-dependent, but several speeches in a single week sent a coordinated message: the last mile of disinflation is the hardest.

What markets expected

Futures markets had priced in as many as four cuts over the next twelve months. After the remarks, that fell to two, and short-dated bond yields rose sharply.

Analysts say the shift matters most for emerging economies whose currencies move with the dollar.

What comes next

The next inflation print, due in two weeks, is now the most closely watched release on the calendar.